From the Associated Press April 12, 2007
By ANNE D’INNOCENZIO, AP Business Writer
“Spring looks bleak for the nation’s retailers. After robust sales in March, there are signs that consumers are already spending less. And a trifecta of problems — rising gas prices, a rougher housing market and the specter of higher interest rates — are likely to make the retail business even tougher in the months ahead. “
I have felt for some time that a recession is coming and that it will not be a mild one. It began with the spike in energy prices a couple years ago. Oil went up too high too fast and stayed there. Sure, it’s down from record highs but it’s still up 500% from when Bush took office. I’m not blaming him for the price but I do blame him for failure to implement an energy policy. Now we’re actually turning our food supply into something to burn in our cars.
Turning corn into fuel is insane. Next time you’re in the grocery store, try to find items that do NOT have corn in them and then consider what the prices of those items will be when the price of corn goes up 500%—we’re half way there.
Add to this the huge cost of the “war on terrorism”. We’ve seen record deficits under Bush II and those bills will come due. Much of the paper has been gobbled up by our friends in China who now hold a lot of power over our economic well-being.
Manufacturing as a percentage of GDP has fallen from 17.3% in 1987 to 14.3% today. (Source: World Bank)
Home foreclosures are at a record high. Personal bankruptcy protection laws have been changed to favor the creditors who are getting away with outrageous practices since the change.
There’s more but I think the point is made. What scares me is that these are things from which there is no recovery, only adjustment. Oil, growing scarcer by the day is not going to get cheaper. The deficit is not going away and manufacturing is not coming back. It’s going to get ugly.
Now is the time to grow your business. Not expand, grow. There’s a difference. Expansion means more space, people, equipment; that’s debt. I say it’s time to build your base. Improve your customer service to the point of creating reliance—make your customers rely on you to keep them going. Make it easy to do business with you but don’t be stupid.
Many businesses will start to extend their payment terms to get “jobs” as business gets tight. Big mistake. Improve your service and if necessary improve your price without extending your terms. Those big jobs with the slow payers will sink your competitors because very often the slow payers become the no payers in a bad economy.
NOTE: I wrote this 1 year ahead of the 2008 crash.